SIP: How Formula of 70:20:10 can save your Mutual Fund Investments from Market Fluctuations
The 70:20:10 ratio is an asset allocation formula that provides investment diversification guidelines across equity, debt and gold to construct resilient mutual fund portfolios. As the rule implies, it advocates allocating approximately 70% to equity funds for growth potential, 20% to fixed-income for stability and 10% to gold funds as a hedge against inflation. Balancing investments across assets with varying risk-return profiles in this manner can mitigate overall portfolio volatility arising from fluctuating market conditions.
Maintaining this ratio via periodic rebalancing aids in risk containment across cycles. This underpins why the 70:20:10 formula can lend mutual fund portfolios enhanced consistency of returns amidst external turbulence.
Understanding SIPs and Market Fluctuati...